More jobs are eligible for student loan forgiveness under expanded rules

The Biden administration has implemented new rules governing a well-known student loan forgiveness program for borrowers who work in the nonprofit and public sectors.

The updated regulations simplify the definition of full-time employment. The changes also expand the program to include certain professions that were previously excluded from loan forgiveness. And the new rules are already live.

Student Loan Forgiveness under PSLF

Public Service Loan Forgiveness is for borrowers who work in non-profit or government positions. Those who make 120 qualifying monthly payments — the equivalent of 10 years — can receive full federal student loan forgiveness.

The original PSLF rules were quite strict when it came to defining what counted as qualifying employment or qualifying payment. Originally, only payments made on Direct federal student loans under a 10-year Standard or income-based repayment plan could be counted. And only full-time, direct W-2 employment for qualifying organizations (primarily 501(c)(3) organizations and government entities) was eligible. To meet PSLF requirements, borrowers had to be considered “full-time” by their employer while working at least 30 hours per week or more.

Waivers have provided expanded student loan forgiveness through PSLF

Over the past two years, the Biden administration created two temporary programs designed to expand access to PSLF and address the program’s historic problems, such as rampant misinformation and mismanagement by both the government and contract loan servicers .

These initiatives—the PSLF Limited Relief, which expired last fall, and the IDR Account Adjustment, which is ongoing—relaxed the strict rules governing what constitutes “qualifying payment.” The waivers allowed many previously disallowed repayment, deferment and forbearance periods to now count toward loan forgiveness under PSLF. So far, more than 700,000 borrowers have received student loan forgiveness through PSLF under these waiver initiatives — more than a 100-fold increase compared to previous years.

But with a few minor exceptions, the waiver and bill adjustment did little to change what is considered appropriate PSLF work. To make changes on this front, the Biden administration chose to update the regulations governing the PSLF program.

New rules Expand jobs that qualify for student loan forgiveness

The Biden administration enacted new PSLF regulations on July 1. These rules update the definition of qualifying employment in three key ways, expanding avenues for student loan forgiveness for key groups of borrowers:

• Simplified definition of full-time employment. Under the previous rules, borrowers had to work an average of 30 hours a week, and their employer had to consider them full-time. Under the new PSLF rules, “full-time employment is work for a qualifying employer(s) for a weekly average, alone or in combination, equal to at least 30 hours during the period being certified” or “every ‘ throughout the duration of a contract or period of employment of at least 8 months per year’ (as for teachers), according to the Ministry of Education Directive. It no longer matters whether an employer actually considers the borrower to be “full-time” according to its own internal definition.
• Contract employment may now qualify for student loan forgiveness in certain circumstances. Previously, only W-2 direct employment for a nonprofit or public employer could qualify for PSLF. Contractual employment did not qualify under any circumstances. However, under the new rules, “there is an exception if you work in a state that has laws that prevent an otherwise eligible employer from directly hiring employees to fill positions or provide services.” For example, some states have laws that prevent nonprofit or public health facilities from directly hiring certain types of employees. Instead, they are hired as contractors. Under the new PSLF rules, these individuals may now be eligible for student loan forgiveness under PSLF even though they are not W-2 employees at qualifying organizations.
• Additional schools can more easily qualify for student loan forgiveness. Previous PSLF rules made things difficult for adjunct faculty, as institutional employers sometimes certified only the number of instructional or credit hours taught, leaving workers well short of the 30 hours per week required to qualify for student loan forgiveness. Under the new rules, an adjunct or non-faculty member can qualify for PSLF if they reach or exceed 30 hours per week by multiplying each course or contact hour taught per week by a factor of 3.35.

Employment that involves religious instruction, worship services, or proselytizing may also be considered PSLF-eligible employment under previous rule changes that took effect in 2021.

Other changes to student loan forgiveness rules

In addition to expanded regulations governing qualified employment, these changes to the PSLF rule will also allow for more repayment, deferment, and forbearance periods to count toward student loan forgiveness.

And last month, the Department of Education introduced a new safe harbor feature. Under this rule, borrowers will be able to “buy back” certain previous loan periods that were determined to be ineligible for student loan forgiveness under the PSLF program.

Further reading on student loan forgiveness

8 hardships could qualify for automatic student loan forgiveness under Biden plan

2.9 million borrowers won’t have to pay their student loans under new Biden plan

The deadline for major student loan forgiveness is looming, but it could be extended

5 Updates On Student Loan Forgiveness As The Ramp Begins And Trouble Gets Worse